Invisible Money (Credit Cards in general)

Member Name: thanatoszane

Product:	Credit Cards in general
Date:	26/02/01 (142 review reads)
Rating:

Advantages: Handy for when you need some cash quick in the short term

Disadvantages: Interest! Extras tend to be gimicks.

Credit cards can be useful, and many have a lot of added extras, but there is one major problem with them - they don't feel like money!

It's easy to go 'Oh, that's 200 pounds, I'll stick it on the card'- but I bet you wouldn't go to the cash machine, pull out 200 pounds, and hand over that lovely wad of cash, would you?

You know what you're spending then, you can feel your wallet get lighter. With a card, you don't realise how much you're handing over until the end of the month. Then you gulp when you see that even if you pay off triple the minimum payment, half of what you pay off will go to cover the interest!

Some cards offer a special reduced rate on balance transfers, and this rate lasts for a set period of time. Problem is, when you transfer your balance from one card over to this card, you will only get charged the special lower rate on the TRANSFERED BALANCE. Any new transactions will be charged at the NORMAL RATE. And, when you pay off money each month, that comes off the reduced rate part of the balance, so you end up paying for the cheapest bit first, and have loads of interest mounting up.

To explain that better, lets say you transfered 1500 pounds over to a new card, and the interest rate was 6% on this balance for the first 6 months, but the regular rate was 12%. You then put on an extra 200 pounds a month, and pay off 250 a month.

You would be reducing the balance by 50 pounds a month, yes, but that 50 would be coming off the 1500 pound, meaning after the first month you would be getting charged 6% interest on 1250, and 12% on the remaining 200. The month after, 6% on 100 and 12% on 400. See how it works now? If you're going to use the card other than to transfer over an existing balance for the reduced interest, then you aren't really getting such a good deal.

Some cards offer reward points. These can be redeemed for vouchers / useless hou
sehold appliances / whatever. Like most reward schemes, unless you use them frequently, then it will take ages to earn anything. It's certainly not worth putting stuff on the cards just to earn points.

Barclaycard offer a free warranty on goods over 50 pounds. This is useful, but not quite as good as it first seems. I've taken them up on this offer on two occasions. The first time, I got it, but ended up recieving more snail spam asking me to upgrade to a five year warranty with them than I did email spam last time I posted to a free for all links page! (For non webmasters, FFA Links pages are notorious for being ran by spammers who grab your email address to sell on.) The second time I tried, they told me that the offer was only available for things that aren't covered by a store warranty. This means that it's really only for......um, I can't think of anything I'd buy that doesn't have a store warranty.

The first thing I bought was covered by a store warranty, so they must have given me the cover by mistake. I have heard people use the cover for train tickets, but other than that, what use is it? Most electrical goods bought from high street shops aren't eligible, so it's no use to me.

If you buy online, a credit card is a must, in fact, if you want to get online at all a credit card is almost essential these days! Lots of ISPs want a credit card number when you sign up. I don't think that's very nice for the people on low incomes, but that's the way it is.

One thing I only learned recently is that credit cards are 'guarenteed payment methods'- this means that if you had an agreement with a company, and this broke down, you could not block transactions from that company. If they tried to take money from you, even if you had told them not to, and they had told you that they would not take it, they still could. You would then have to dispute the transaction AFTER
it had happened.

I was placed in that situation recently with my ISP. I had expected to be able to prevent them taking money from me, since they had cancelled my account. Unfortunately, this isn't possible. It seems the card companies prefer the businesses to the card holders. I can understand why - they don't want people buying then blocking everything in sight, but it hardly makes things easy for customers who have been ripped off, does it?

Credit cards are very flexible. They have a wide range of uses, and can come in handy if you need to buy something NOW but don't have the cold, hard cash needed.

If you're in a really tight situation you can get a cash advance from an ATM, although you will get charged a set fee for withdrawing cash on your card.

You can even get cheque books associated with your card - that costs money as well, though.

Don't see the 'if you play it right you'll have 50 days interest free credit' thing as a bonus either. Would you REALLY sit down with a calendar and think 'I can buy that new video recorder on the 5th of the month, then pay back in 3 weekly installments and not get charged any interest? NO! Most people will put the thing on the card the week before the statement arrives, forgetting about it, then go 'Omigod did I really spend 300 pounds on that!' and have to pay the interest. The interest free credit sounds good, but it's never any use in real life situations.


Banks are eager to give cards out these days. They're also eager to raise your credit limit whenever they have a chance, and offer you loans to pay back your balance, and give you cheque books so that you can spend more money you don't have in new and exciting ways.....

As long as you don't fall for all their offers and end up spending more than the GNP of some small countries, then I think credit cards are good things - they can tide y
ou over those months when all the bills come at once, and give you a bit freedom to treat yourself every now and then.

Just be sensible, and don't get ten cards and max them all out!

Summary: